Larsen & Toubro Ltd has announced a Offer for sale up (OFS) of 59,00,000 equity shares (base offer) of Larsen Toubro Infotech Ltd of face value of Re. 1. The share sale in LTI OFS base offer represents 3.41% of the total paid up equity share capital. Further as part of LTI OFS there is an option to additionally sell 46,27,288 equity shares representing 2.67% of the total paid up equity share capital of the Company refereed to as the Over subscription or Green show Option. LTI OFS (L&T Infotech OFS) opens on September 03, 2018 (“T Day”) for non-Retail Investors only and on September 04, 2018 (T+1 Day) for Retail Investors and for Non-Retail Investors who choose to carry forward their bids. The seller ‘Larsen Toubro Infotech’ has to intimate the stock exchanges of its intention to exercise the oversubscription after trading hours (i.e. on or before 5 pm) on September 03, 2018.
About Larsen Toubro Infotech OFS (LTI OFS)
| Issue Period | Sept 03, 2018 for Non Retail & Sept 04,2018 for Retail & Non Retail Investors who choose to carry forward their bids |
| Floor Price in Rs. | 1,700.00 |
| Last Transacted Price in Rs. | 1,796.15 |
| Base Offer Size – (Shares) | 59,00,000 |
| Green Shoe Option (Shares) | 46,27,288 |
| Total Shares (Base Size + Green Shoe) | 1,05,27,288 |
| Base offer for Retail | 5,90,000 |
| Green Shoe option Retail | 462728.8 |
| Total Offer Size Retail (Shares) | 10,52,729 |
| Total Offer Size Retail in Rs. Crore | 178.96 |
| Base Offer Size Non Retail (Shares) | 53,10,000.00 |
| Base Offer Size Non Retail in Rs. Crore | 902.70 |
| Green Shoe Size Non Retail (Shares) | 41,64,559.00 |
| Green Shoe Size Non Retail in Rs. Crore | 707.98 |
| Tot. Offer Size Non Retail (Shares) | 94,74,559 |
| Tot. Offer Size Non Retail In Rs. Crore | 1,610.68 |
| Face Value | 1 |
| Lot Size | 1 |
| Tick Price | 0.05 |
| Minimum Bid Quantity | 1 |
| Allocation Methodology | Price Priority |
| Selling Member | Axis Capital , Citigroup Global Capital Markets India Pvt Ltd, Goldman Sachs (India) Securities , HSBC Securities and Capital Markets, JM Financial Services and Motilal Oswal Financial Services Ltd. |
| Seller Promoter | Larsen & Toubro Infotech shares by L&T |
L&T Infotech OFS (LTI OFS): Day 1 and Day 2 Updates
Listing Day: Retail Investors have the option to walk with 5% gains. Though LTI looks to be in good uptrend.
Day 2:
Retail investors who have put their bid at 1772.55 and above likely to get full allotment.
Retail subscription 1.63 x ( on Total shares including Green shoe).
The LTI share closed at Rs. 1861 up 4.95%.
Day 1
At the end of Day 1, LTI OFS received good response from Investors.
| Base Offer for Non Retail (No. of Shares) | 53,10,000 |
| Total Offer for Non Retail (includes Greenshoe) | 94,74,559 |
| bse total bids | 1,77,36,509 |
| nse total bids | 1,21,02,985 |
| Total Bids from Both Exchanges | 2,98,39,494 |
| Over subscription ( X times) | 3.149 |
Based on the bidding at BSE and NSE, Investors who have bid above Rs. 1751 are likely to be allotted shares in the LTI OFS.
OFS Allocation Methodology
- Retail investor shall mean an individual investor who places bids for Offer Shares of total value of not more than Rs. 2,00,000/- (Rupees Two Lakhs) aggregated across Stock Exchanges.
- A Retail Investor may bid at any price above the Floor Price and/or bid at “Cut-Off Price”. “Cut-Off Price” means the lowest price, as shall be determined, at which the Offer Shares are sold in the Non-Retail Category, based on all valid bids received on T Day.
- Allocation to retail Investors shall be made based on the Cut-Off Price. Upon determining Cut-Off Price for the Retail Investors, the Other Shares reserved for such category shall be allocated to eligible bids of Retail Investors on price priority method at multiple clearing prices / Cut-Off’ price in accordance with SEBI OFS Circulars. In the case of retail potion being oversubscribed, the aggregate number of Offer Shares bid for at a particular clearing price / Cut-Off Price, as the case may be, is more than available quantity then the allocation for such bids will be done on a proportionate basis at such clearing price (at or above the Cut-Offer Price) / the Cut-Off Price, as the case may be.
- Individual investors shall have the option to bid in the Retail Category and the Non-Retail Category. However, if the cumulative bid value by such an individual investor across both categories exceeds Rs. 2,00,000/- (Rupees Two Lakhs), the bids in the Retail Category will become ineligible. Further, if the cumulative bid value by an individual investor in the Retail Category across the Stock Exchanges exceeds Rs. 2,00,000/- (Rupees Two Lakh only), such bids shall be rejected.
- Settlement shall take place on a trade for trade basis. For bids received from Non-Retail Category on T Day, non-institutional investors and institutional investors who place orders with 100% of the order value deposited upfront, settlement shall take place on a T+I Day, in with the SEBI OFS Circulars. In the case of institutional investors who place bids without depositing 100% of the order value upfront, settlement shall be as per the existing rules for secondary market transactions (i.e., on T+2 Day).
For the bids received on T+l Day, from the Retail Category and from the un-allotted non-Retail Investors who choose to carry forward their bid to T+l Day, the settlement shall take place on T+3 Day.
In case of non-institutional investors and institutional investors bidding with 100% margin upfront who chose to carry forward their un-allotted bids to T+1 Day, the settlement shall take place<on_T+2_Day. - The allocation to the non-Retail Investors shall be at price equal to the Cut-off Price or higher as per the bids.
About Larsen Toubro Infotech
Larsen & Toubro Infotech Limited (LTI) (NSE: LTI), is a global technology consulting and digital solutions company helping more than 300 clients succeed in a converging world. It has operations in 27 countries and provides clients and accelerate their digital transformation with LTI’s Mosaic platform enabling their mobile, social, analytics, IoT (Internet of Things), cloud and cyber security journeys. In 2017, NASSCOM ranked the Company as the sixth largest Indian IT services company in terms of export revenues. The company was amongst the top 15 IT service providers globally in 2017 according to the Everest Group’s PEAK Matrix for IT service providers. Its clients comprise some of the world’s largest and well-known organizations, including 59 of the Fortune Global 500 companies. LTI offers an extensive range of IT services to its clients in diverse industries such as Banking & Financial Services, Insurance, Manufacturing, Energy & Utilities, Consumer Packaged Goods, Retail and Pharma, High-Tech and Media & Entertainment. Its range of services includes application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions, cyber security and platform based solutions.
Quarterly Results (figs in Rs. Crore)
| Jun-18 | Mar-18 | Dec-17 | Sep-17 | Jun-17 | Mar-17 | |
| Net Sales | 2155.7 | 2001.2 | 1883.8 | 1750.8 | 1670.7 | 1677.2 |
| Other Income | 107.1 | 117.1 | 91.7 | 105.3 | 111.9 | 51.7 |
| Total Income | 2262.8 | 2118.3 | 1975.5 | 1856.1 | 1782.6 | 1728.9 |
| Total Expenditure | 1736.8 | 1709.3 | 1562.2 | 1456.6 | 1390.9 | 1358.2 |
| PBIDT | 526 | 409 | 413.3 | 399.5 | 391.7 | 370.7 |
| Interest | 3.4 | 5.2 | 3.5 | 3.6 | 3.5 | 1.5 |
| PBDT | 522.6 | 403.8 | 409.8 | 395.9 | 388.2 | 369.2 |
| Depreciation | 37.8 | 36 | 40.3 | 40.6 | 39.3 | 41.7 |
| Tax | 123.6 | 78.4 | 86.7 | 82.3 | 81.7 | 73 |
| Profit After Tax | 361.2 | 289.4 | 282.8 | 273 | 267.2 | 254.5 |
| EPS (Unit Curr.) | 21 | 16.84 | 16.49 | 15.95 | 15.66 | 14.92 |
| Equity | 17.2 | 17.2 | 17.1 | 17 | 17.1 | 17.1 |
| PBIDTM(%) | 24.4 | 20.44 | 21.94 | 22.82 | 23.45 | 22.1 |
| PBDTM(%) | 24.24 | 20.18 | 21.75 | 22.61 | 23.24 | 22.01 |
| PATM(%) | 16.76 | 14.46 | 15.01 | 15.59 | 15.99 | 15.17 |
L&T Infotech Share Price Trend
L&T Infotech – Comparison with Peer Group
|
COMPANY |
TCS | INFY | HCLTECH | WIPRO | TECHM | Oracle | L&T Info |
| PRICE (Rs.) | 2078.2 | 1440 | 1046.45 | 301.65 | 764.6 | 4170.8 | 1796.15 |
| MKT CAP(Rs Cr) | 795660 | 314525 | 145718 | 136468 | 74984.3 | 35727.1 | 31073.4 |
| SALES ((Rs Cr) | 32075 | 19128 | 13878 | 14230.6 | 8276.28 | 1344.86 | 2155.7 |
| PROFIT (Rs Cr) | 6925 | 3612 | 2431 | 2093.8 | 899.47 | 401.85 | 361.2 |
| PATM(%) | 21.59% | 18.88% | 17.52% | 14.71% | 10.87% | 29.88% | 16.76% |
| EPS | 67.15 | 74.04 | 54.48 | 16.84 | 42 | 126.59 | 70.66 |
| P/E* | 30.95 | 19.45 | 19.21 | 17.91 | 18.2 | 32.95 | 25.42 |
| Q1FY19 EPS ann.* | 76.68 | 64.16 | 57.05 | 17 | 37.4 | 174.98 | 80.77 |
| PE based on abv | 27.1022 | 22.4439 | 18.3427 | 17.7441 | 20.4439 | 23.8359 | 22.2378 |
| * Annualized |
On the floor price of Rs. 1700 for LTI OFS, L&T Infotech PE (FY18) works out to be 24.06 and based on Q1FY19 annualized figures the PE works out to be 21.05
Assessment:
- LTI revenue at Rs. 1152 crores for Q1-FY19 showed 9.2% growth quarter-on-quarter and a 40% plus YoY growth. In dollar terms, the revenue in constant currency in dollar terms has grown at 5.6% Q-on-Q and 33.2% YoY.
- LTI Net Profit margin for Q1FY19 stood at 17% which is improvement of 90 basis points quarter-on-quarter. This was helped by strengthening of Dollar.
- Digital revenue now forms 34 per cent of LTI revenue share.
- At 27% revenue share BFS was the fastest growing vertical with primarily digital and data based projects coming in it.
- In Q4FY18 Larsen Toubro Infotech gave a guidance of at least 16% organic growth in FY19. Based on backlog and pipeline, the management was indicated that it can do better than 16% in FY19 compared to FY18.
- On the floor price of Rs. 1700 for LTI OFS, L&T Info PE works out to be 24.06 and based on Q1FY19 annualized EPS , PE is 21.05 which can be considered reasonable looking at present uptrend in IT sector and stock markets preference for this sector. However at this stage significant upside is capped.
- Bidding in OFS opportunities is challenging for retail investors because of the need to may money upfront and change in bid price by large investors at the last moment. Hence chances of allotment many times is difficult.I intend to apply in Larsen Toubro Infotech OFS (LTI OFS) with a view to get an allocation but may not bid very aggressively. If allotted shares in LTI OFS, I have expectation of moderate returns in short to medium term.
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.